Hotter than expected PCE figures sparked a massive sell-off on Wall Street and later comments from two FED members - Mester and Jefferson provided more fuel for the bears.
Mester:
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It is gratifying that inflation declined from peak, but more is needed.
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The rate peak matters more than the meeting to meeting moves.
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The PCE report shows that the Fed needs to do a little more.
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Outlook for non-housing core services inflation depends on whether labor demand moves into better balance with labor supply
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It is more costly to set policy assuming inflation expectations are well anchored when they aren't, than the other way.
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With a strong labor market, the costs of undershooting on policy or prematurely easing still outweigh costs of overshooting.
Jefferson:
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Wage growth is still running too high to be consistent with timely, and a sustainable return to 2% inflation.
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Ongoing imbalance between supply and demand for labor suggests high inflation may come down, only slowly.
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The inflation risk is skewed to the upside.
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The economy does end up in recession in most disinflations.
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Outlook for non-housing core services inflation depends on whether labor demand moves into better balance with labor supply.
US500 keeps moving lower and is currently testing 200 SMA (red line) at 3950 pts, which is the lowest level since January 20. Break lower would open the way towards major support at 3920 pts, which is marked with previous price reactions and earlier broken long-term downward trendline. Source: xStation5
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